Question

Required information Problem 11-41 (LO 11-3, LO 11-4) [The following information applies to the questions displayed below.) In year 0, Longworth Partnership purchased a machine for $53,500 to use in its business. In year 3, Longworth sold the machine for $40,700. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,500. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Problem 11-41 Part-a a. What is the amount and character of the gain or loss Longworth will recognize on the sale? Amount Description Total Gain/(Loss) Recognized Character of Recognized Gain/(Loss): Ordinary Gain/(Loss) $1231 gain/loss)

Answer 1

• Machine Purchased Price $53500
• Sold the Machine for $40700
• Depreciation on machine up to date of sale $22500
• Machine price after depreciation = $53500 - $22500 = $31000
• The Gain Recognized = $40700 - $31000 = $9700
• The character of gain is Section 1231 gain from sale of depreciable property.
• 1231 Gain

Selling Price $40700

Basis before depreciation $53500

Less : Depreciation $22500

Adjusted Basis       ($31000)

Gain on Machine $9700